Remortgage is defined as the replacement of an existing mortgage with a new one. Most people remortgage because they have found a better mortgage rate.
Bad Credit remortgages are designed to assist people who through their decisions or life circumstances have had more than a couple of hits against their credit rating. Many people who have a bad credit rating do not understand that they are eligible for one of these remortgages. Bad credit remortgages are only available at financial institutions that specialize in bad credit remortgages. After you have closed on this loan modification, then it works like a traditional loan in that it your property is held as security in case you default. Then a payment plan is set up with monthly payments at an agreed upon rate.
There are a variety of reasons why people's credit has been ruined. Bankruptcy is the most common cause of bad credit, but it can also be caused by having a court judgement against you involving previous loan commitment.
The first step is to find an institution that offers bad credit remortgages. If your credit is not up to their standards, you will not get a traditional loan. But if you apply for a bad credit remortgage, you are more likely to be approved.
One fact of a bad credit remortgage that you are going to have to live with is that your mortgage rates are going to be higher than the last mortgage that you had (assuming that your last mortgage was a traditional one). Financial institutions charge higher rates to offset their risk. People with bad credit are looked upon by financial institutions as a higher risk. This means that individuals with bad credit are more likely to default on the mortgage, therefore they are charged a higher interest rate.
One piece of advice when remortgaging is to take out the equity in your house. Equity is defined as the difference between the market value of the property and what is owed. This should be done before you apply for the loan so the equity can be used as a down payment. A large down payment will help you with loan approval and will also assist you in receiving a better interest rate. If you cannot use the equity for a down payment, it can be used for living capital. Remember that by the time you have to use a bad credit remortgage, your finanacial situation is in a crisis situation. A rule of thumb is to never take the equity out of your house until you are in a crisis situation.
A bad credit remortgage can help a homeowner out of a bad situation. People with bad credit have a difficult time finding traditional loans. A bad credit remortgage can be the first step in rebuiding your credit after some difficult life circumstances.